Q3 2024 Ameren Corp Earnings Call
Greetings and welcome to the Ameren Corporation 3rd Quarter 2024 Earnings Call.
At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation.
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As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Mr. Andrew Kirk, Director of Industrial Relations and Corporate Modeling for Emerin Corporation. Mr. Kirk, please proceed.
Thank you and good morning. On the call with me today are Marty Lyons, our Chairman, President, and Chief Executive Officer, and Michael Moehn, our Senior Executive Vice President and Chief Financial Officer, as well as other members of the Airmen Management Team.
This call contains time-sensitive data that is accurate only as of the date of today's live broadcast and redistribution of this broadcast is prohibited. We have posted a presentation on the Amarinvestors.com homepage that will be referenced by our speakers.
As noted on page 2 of the presentation, comments made during this conference call may contain statements about future expectations, plans, projections, financial performance, and similar matters, which are commonly referred to as forward-looking statements.
Speaker Change: Please refer to the forward-looking statements section in the news release we issued yesterday, as well as our SEC filings, for more information about the various factors that could cause actual results to differ materially from those anticipated. Now here's Marty, who will start on page 4.
Marty Lyons: Thanks Andrew. Good morning everyone. Thank you for joining us today as we cover our third quarter 2024 earnings results.
I'll begin today on page four.
Speaker Change: We're focused on delivering strong, long-term value for our customers, communities, shareholders, and the environment.
Speaker Change: By investing in rate-regulated infrastructure, enhancing regulatory frameworks, and advocating for responsible energy policies, we are positioning ourselves to take advantage of future opportunities to benefit all of our stakeholders.
Speaker Change: And through a disciplined approach to optimizing our operating performance, we have been able to keep our customer rates low in comparison to the national average as we transform the energy grid to enhance reliability and provide cleaner energy to our communities.
Speaker Change: We remain excited for the future, and we see strong growth opportunities unfolding over the next decade.
Turning to page 5.
Speaker Change: Yesterday we announced third quarter 2024 adjusted earnings of $1.87 per share compared to earnings of $1.87 per share in the third quarter of 2023. These comparable adjusted earnings results were in line with our expectations.
Speaker Change: The third quarter and year-to-date 2024 adjusted results exclude two charges related to separate proceedings that had been ongoing for over a decade.
Speaker Change: The first, related to an agreement in principle to settle the Rush Island Energy Center New Source Review and Clean Air Act proceeding, and the second,
Speaker Change: for customer refunds required by the Federal Energy Regulatory Commission's FERC's October 2024 order, which established a new base return on equity within the Mid-Continent Independent System Operator, or MISO,
Speaker Change: that was applied retroactively to certain periods extending back to 2013.
Speaker Change: Key earnings drivers are highlighted on this page. Mike will discuss the factors driving the quarterly results in more detail in a moment.
Speaker Change: Our strong investment pipeline continues to drive earnings growth, and I'm excited about the significant economic growth opportunities in the communities we serve.
Speaker Change: The greater St. Louis region is experiencing some of the highest employment growth we've seen in the better part of three decades.
Speaker Change: In August, the region was ranked fourth among large metro areas in the country for employment growth. And we're seeing this strength in our region reflected in strong weather-normalized retail sales growth year-to-date across all customer classes in Missouri.
Turning now to page six.
Speaker Change: Thanks to our team's execution of our strategy over the course of this year, we have a strong foundation as we head into the final months of 2024. We expect to deliver 2024 earnings within our adjusted guidance range of $4.55 per share and $4.69 per share.
Speaker Change: And we expect our 2025 earnings per share to be in the range of $4.85 and $5.05, with the midpoint representing a 7.1% increase over the midpoint of our 2024 adjusted guidance range.
Speaker Change: While historical practice has been to provide initial earnings guidance on our fourth quarter earnings call in February, we're issuing this 2025 guidance now to reinforce our confidence in our ability to deliver on our 6-8% earnings per share growth guidance expectations.
Speaker Change: We expect to provide our long-term earnings growth guidance and capital and financing plans on our year-end call in February.
Speaker Change: On page 7, we highlight the latest advancements across AMRIN as we execute our strategic objectives for the year.
Speaker Change: Our infrastructure investment plan is designed to improve the reliability, resiliency, safety, and efficiency of our system as we remain focused on a reliable clean energy transition.
Speaker Change: Year-to-date, we've invested $3 billion to replace aging infrastructure and also build the new infrastructure needed to meet our customers' growing demands with a diverse mix of energy resources.
Speaker Change: On the regulatory front, MISO's long-range transmission planning process is progressing toward approval of the TRONCH 2.1 portfolio by the end of the year.
Speaker Change: In September, MISO released additional Tronch 2.1 project details, which included approximately $3.6 billion of transmission investment needed in our Missouri and Illinois Service Territories to support reliability for the region.
Speaker Change: At Amherst, Missouri, we're working to bring more dispatchable generation onto the grid.
In October, the Missouri Public Service Commission
Speaker Change: or Missouri PSC, approved a Certificate of Convenience and Necessity, or CCN, and post-construction cost deferral for the 800-megawatt Simple Cycle Natural Gas Energy Center, Castle Bluff.
Speaker Change: This $900 million investment in dispatchable generation will support energy reliability in our region and will also create hundreds of construction jobs, several new permanent jobs and additional tax revenue for the region.
Speaker Change: In addition, in November, we reached an agreement in principle with the U.S. Department of Justice to settle the Rush Island Energy Center New Source Review and Clean Air Act proceeding. I'll cover the details of the agreement in a moment.
And finally,
Speaker Change: At Amherst, Illinois, in October, the Administrative Law Judge, or ALJ, issued a proposed order regarding our revised 2024-2027 Electric Distribution Multi-Year Rate Plan.
Speaker Change: Importantly, the ALJ proposed order supports 99% of our requested rate base when excluding the impacts of other post-employment benefits or OPEB.
Speaker Change: Following our team's extensive engagement with key stakeholders, all intervenors support the Illinois Commerce Commission's, or ICC's, approval of a revised grid plan with limited adjustments.
Speaker Change: We look forward to an ICC decision by the end of this year, which we expect to be consistent with the multi-year capital plans we issued in February.
Speaker Change: Last, operational performance across our company remains strong, with a focus on delivering safer, more reliable, and affordable energy through grid hardening, enhanced automation, optimization, and standardization.
Speaker Change: Turning to page 8 for an update on Amherst, Missouri's new generation projects.
Speaker Change: We continue to execute our Ameren, Missouri Integrated Resource Plan, or IRP, which focuses on maintaining and building a diverse, cleaner generation portfolio to ensure a reliable and low-cost mix of energy resources to serve our customers' needs.
Speaker Change: As I mentioned, we have three solar projects in the later stages of commissioning and testing and that are expected to be in service by the end of this year.
Speaker Change: We're also working toward the successful construction of another 400 megawatts of solar generation across three additional projects, which we expect will be ready to serve customers in late 2025 and 2026.
Speaker Change: Further, as I mentioned, in October, the Missouri TSC approved a CCN for the dispatchable 800-megawatt Simple Cycle Natural Gas Energy Center, Castle Bluff, following a constructive settlement with the Commission staff and other intervenors.
Speaker Change: The order also includes post-construction cost deferral to reduce unrecovered costs by allowing us to defer and recover the depreciation expense from the Castle Bluff Energy Center and an adjusted weighted average cost of capital return on the investment.
Speaker Change: from the time it is placed in service to when it is incorporated into base rates.
Speaker Change: As solar energy predictably rises and then falls every day, it is vital to have Castle Bluff Energy Center to bolster grid reliability for our customers.
Speaker Change: Prep work has begun on Castle Bluff, which will be located on the site of our retired Merrimack Energy Center, allowing us to cost-effectively expedite the construction by leveraging an existing site with infrastructure in place.
Speaker Change: The Energy Center is expected to be in service for our customers by the end of 2027. We look forward to continuing to work with key stakeholders to bring additional generation online as quickly as possible to meet the needs of all customers, including businesses looking to relocate or expand in Missouri.
Speaker Change: Moving now to page 9 for an update on the MISO long-range transmission projects.
Speaker Change: In September, MISO provided additional detail and individual project cost estimates underlying the almost $22 billion Tronch 2.1 portfolio, which is expected to drive significant reliability and capacity benefits for the region.
Speaker Change: The portfolio includes three projects in our Missouri and Illinois service territories that collectively represent an investment opportunity of approximately $3.6 billion.
Speaker Change: We await MISO's determination of which projects will be directly assigned or which will go through a competitive bidding process.
Speaker Change: MISO expects to approve the TRANCH 2.1 projects by the end of this year. Once approved, MISO plans to commence work in 2025 on the TRANCH 2.2 portfolio to address further transmission needs in the North and Midwest regions.
Speaker Change: As we continue to see substantial load growth across the country, MISO and its transmission owners will continue to assess whether the current long-range transmission future scenarios will be sufficient to support our region's energy needs in the years ahead.
Speaker Change: Moving now to page 10 for an update on our expanding customer growth opportunities.
Speaker Change: Our service territories have a broad-based, diverse economy, which continues to expand across a variety of manufacturing sectors, including aerospace, agriculture, and food processing, to name a few.
Speaker Change: So far this year, we've received expansion commitments or executed new contracts for approximately 350 megawatts of new load from data centers, manufacturing, and other industries, 90% of which is located in Missouri.
Speaker Change: These projects are expected to create more than 2,200 jobs. We expect these new and expanding customers to be fully ramped up by 2028.
Speaker Change: We're excited about these opportunities and see tremendous additional opportunities for growth over the next five to seven years, which will bring jobs and additional tax base to benefit our state and local communities.
Speaker Change: Through ongoing collaboration with a variety of state and local stakeholders, we continue to attract new business and data center interest.
Speaker Change: Over the last few months, our economic development pipeline of potential additional demand has doubled in size, and we are making meaningful progress with several potential customers.
Speaker Change: These customers, representing several gigawatts of interest, have completed transmission engineering studies and, over the coming months, each will further evaluate the site locations and determine whether they will move forward with construction agreements.
Speaker Change: We're pleased to offer reliable service and competitive rates, as well as the people, resources, expertise, and partnerships needed to deliver for these customers.
Speaker Change: The ultimate net financial impact of any incremental load will be dependent upon a variety of factors, including customer ramp-up time, additional generation or grid investments needed, timing of rate reviews, and tariff structures.
Speaker Change: To that end, we are in the process of carefully evaluating potential load growth opportunities and our associated generation portfolio needs and would expect to update our IRP by February of 2025.
Speaker Change: This is an exciting time in our industry, and we look forward to finding solutions for these significant potential new customers.
Turning then to page 11.
Speaker Change: After almost 50 years of providing cost-effective energy to our customers, our Rush Island Energy Center was safely retired on October 15th. We are grateful to our co-workers who made this plant a reliable and low-cost energy source for our customers for many decades.
Speaker Change: Careful planning over several years enabled us to ensure that every employee impacted by the retirement of Rush Island had an opportunity with the company as we continue to thoughtfully transition our generation resources while retaining our talented workforce.
Speaker Change: The Missouri PSC has authorized recovery of approximately $470 million of costs related to retirement of Rush Island through the issuance of securitized utility tariff bonds, and we are working through the next steps to execute that issuance.
Speaker Change: In addition, in November, Emory, Missouri and the U.S. Department of Justice reached a settlement agreement, in principle, requiring Emory, Missouri to fund two mitigation relief programs in addition to retiring the Energy Center.
Speaker Change: The cost of these programs, which will provide for the electrification of school buses over a three-year period and air purifiers for eligible Amherst, Missouri residential customers over 12 months, totals $64 million.
Speaker Change: And, the charges recorded this year, related to this agreement, are excluded from our adjusted earnings results.
Speaker Change: The agreement between the DOJ and Amherst, Missouri is subject to approval by the U.S. District Court for the Eastern District of Missouri, which is expected by the end of the year.
Moving to page 12.
Speaker Change: Looking ahead over the coming decade, we have a robust pipeline of investment opportunities of more than $55 billion that will continue to deliver significant value to our stakeholders, create thousands of jobs, generate tax revenue for our local economies, and support economic growth in our region.
Speaker Change: Importantly, our 10-year investment pipeline does not reflect possible additional generation as we evaluate our needs to serve potential additional load growth.
Speaker Change: Any such changes to our 10-year investment pipeline will be reflected in our February Earnings Call Update.
Moving to page 13.
Speaker Change: Our five-year growth plan, released last February, included our expectation of a 6 to 8 percent compound annual earnings growth rate from 2024 through 2028.
Speaker Change: This earnings growth is driven by strong compound annual rate-based growth of 8.2 percent and strategic allocation of infrastructure investment to each of our business segments based on their regulatory frameworks.
Speaker Change: Investment in Ameren presents an attractive opportunity for those seeking a high-quality utility growth story.
Speaker Change: combined our strong long-term six to eight percent earnings growth and an attractive and growing dividend, which today yields 3.1 percent, result in a compelling total return story.
Speaker Change: We have a strong track record of execution, a strong balance sheet, and an experienced management team. I'm confident in our ability to execute our investment plans and other elements of our strategy across all four of our business segments.
Speaker Change: Again, thank you all for joining us today, and I'll now turn the call over to Michael.
Michael Moehn: Thanks Marty and good morning everyone. I'll begin on page 15 of our presentation with an earnings reconciliation for the two earnings adjustments that Marty mentioned earlier.
Speaker Change: Yesterday, we reported third quarter 2024 gap earnings of $1.70 per share, which included a charge for additional mitigation relief related to the Rush Island Energy Center.
Speaker Change: and a charge for the October 2024 FERC order on MISA's allowed base ROE.
Speaker Change: both of these charges related to matters outstanding for the last decade.
Speaker Change: excluding these two chargers and reported third quarter adjusted earnings of $1.87 per share compared to earnings of $1.87 per share for the year ago quarter.
Speaker Change: The total after-tax charge of $0.17 per share in 2024 related to our Rush Island Energy Center reflects the estimated cost of the mitigation relief programs agreed to with the U.S. Department of Justice.
Speaker Change: This includes the $0.04 per share charge recorded in the first quarter of 2024.
Speaker Change: Subject to approval by the district court, we expect a settlement agreement to resolve the proceeding related to the new source review provisions of the Clean Air Act.
Speaker Change: Turning to the charge for the FERC order, recall since November 2013, the allowed base ROE for FERC regulated transmission weight base within the MISO has been subject to review.
Speaker Change: In FERC's October 2024 order, it established a new base ROE of 9.98% for the periods of November 2013 through February 2015 and September 2016 forward.
Speaker Change: which decreased the allowed base ROE from 10.02% and will require refunds with interest for these periods, pulling an after-tax impact of $0.04 per share.
The return on equity from MISO projects is now 10.48%.
Speaker Change: including the 50 basis point adder. And we do not expect a four basis point decrease in ROE to have a material impact on earnings expectations going forward.
Speaker Change: Turn to page 16 for detailed earnings results for the third quarter.
Speaker Change: Our adjusted earnings performance during the quarter were driven primarily by strategic infrastructure investment and discipline cost management, offset by changes in return on equity for Ammon, Illinois electric distribution, and rate design at Ammon, Illinois natural gas.
Speaker Change: Additional factors that contributed to the year-over-year earnings per share results are highlighted on this page.
Year-to-date results are outlined on page 26 of today's presentation.
Speaker Change: Before moving on, I'll touch on sales trends for Aaron, Missouri and Aaron, Illinois electric distribution.
Thank you.
Speaker Change: While model of weather this quarter compared to the year ago period created some earnings drag, our third quarter weather normalized retail sales remained strong at an overall increase of approximately 1.5% compared to the year ago period.
Speaker Change: Year-to-date weather-normalized kilowatt-hour sales to Missouri residential, commercial, and industrial customers increased approximately 2%, 1%, and 3%, respectively, compared to last year.
Speaker Change: The year-to-date increase in industrial sales reflect production growth driven by new industrial plan additions and additional shift work in our service territory.
Speaker Change: Year-to-date weather normalized kilowatt-hour sales to Illinois customers were flat compared to last year.
Speaker Change: Recall that changes in Illinois electric sales, no matter the cost, do not affect earnings since we have full revenue to cover.
Thank you.
Speaker Change: On page 17, we summarize select earnings considerations for the balance of the year.
Speaker Change: We expect our 2024 adjusted rents to be in the range of $4.55 to $4.69 per share.
Speaker Change: Notably, we expect a positive year-over-year earnings impact in the fourth quarter driven primarily by strategic infrastructure investments, strong cost management programs, and lower charitable trust contributions compared to the year-ago period.
Speaker Change: I encourage you to take the settlement earnings drivers noted on the slide into consideration as you develop your earnings expectations for the remainder of the year.
Speaker Change: Turning to page 18, where we provide detail on our expectations for 2025 earnings per share.
Speaker Change: As we head into 2025, we feel confident strong execution of our strategic plan this year will position us to deliver on our expected long-term earnings growth.
Speaker Change: With that in mind, we expect 2025 earnings per share to be in the range of $4.85 and $5.05.
Speaker Change: This midpoint of this range represents a little about 7% earnings per share worth compared to the midpoint of our 2024 Adjusted Earnings Guidance Range.
Speaker Change: Expected 2025 earnings detailed by segment as compared to our 2024 expectations are highlighted on this page.
Speaker Change: Beginning with Aaron Missouri, earnings are expected to benefit from new electric service rates effective by June 2025, and higher investment eligible for plant and service accounting.
Speaker Change: Earnings are also expected to benefit from higher weather-normalized retail sales, primarily to Missouri's commercial and industrial customers.
Speaker Change: which are expected to increase by one and two percent respectively, driven primarily by the expansion and growth from our existing customers.
We expect to update our long-term sales forecast in February.
Speaker Change: Further, we expect higher interest expense in Amarillo, Missouri and Amarillo and Perrin.
Speaker Change: Earnings in Amaranth Transmission and Amaranth-Illinois Electric Distribution are expected to rise, driven by higher infrastructure investments.
Thank you.
Speaker Change: Earnings in Amarillo, Illinois natural gas are expected to be lower due to cost recovery impacts between rate reviews.
Speaker Change: In Amerenwide, we expect increased weighted average common share resulting to unfavorably impact earnings per share.
Speaker Change: Robust infrastructure investment and economic growth opportunities, coupled with identified business process optimization opportunities and continued strong strategic focus, give us confidence in our ability to grow in 2025 and the years ahead.
Speaker Change: Bring to page 19 for a brief update on eminent regulatory matters.
Speaker Change: In August, the Missouri PSC set the procedural schedule for our ongoing Miami, Missouri electric rate review.
Speaker Change: Intervening testimony is due in early December, and we expect a decision by the Commission by May 2025, with newer rates effective by June.
David Paz, Martin Lyons,
Speaker Change: Recall that approximately 90% of this request is driven by investment centers and Missouri Smart Energy Plan, including major upgrades to the electric system and investments in generation.
Speaker Change: If approved as requested, new electric service rates would remain well below the national and Midwest averages.
Coming to Amherst, Illinois, Regulatory Matters on page 20.
Speaker Change: Under Illinois formula rate making, which expired at the end of 2023, Amarillo, Illinois was required to follow annual rate updates to systematically adjust cash flows over time for changes in the cost of service and to true up any prior period over or under recovery of such costs.
Speaker Change: For the final record distribution reconciliation of 2023's revenue requirements, in August the ICC staff recommended approval of our proposed 158 million dollar reconciliation adjustment.
Thank you.
Speaker Change: The full amount will be collected from customers in 2025, replacing the prior reconciliation adjustment of $110 million that is being collected during 2024.
Thank you.
Speaker Change: This will result in a net increase in cash below $48 million or approximately 1.5% increase in total average residential customer bill.
Thank you for watching!
Speaker Change: An ICC decision is expected by December, with new rates effective in 2025.
Speaker Change: In October, the LGA recommended a cumulative revenue increase of $315 million based on an average rate base of $4.9 billion by 2027.
Speaker Change: Excluding the OPEB issue, the ALJ's proposed order supports 99% of the rate base that were requested in a revised multi-year rate plan.
Speaker Change: This would allow us to invest in the energy grid to maintain safety, reliability, and the day-to-day operations of our system, while also making progress towards an affordable, equitable, clean energy transition.
Speaker Change: following constructive engagement with the interveners to narrow the remaining issues.
Speaker Change: Their latest proposals will reflect a multi-year grid plan that is largely consistent with our guidance laid out in February.
Speaker Change: We expect an ICC decision by December, with new rates effective January 1, 2025.
Speaker Change: Under the multi-year rate plan framework, annual revenues will be based on actual recoverable costs, year-end rate base, and a return on equity provided they do not exceed 105% of the approved revenue requirements after certain exclusions.
Thank you.
Moving to page 22, we provide a financing update.
We continue to feel very good about our financial position.
Speaker Change: Our aim is to parent long-term issuer credit ratings of BAA1 and BBB plus at Moody's and S&P respectively, compare favorably to the peer average, providing us with financial flexibility.
Speaker Change: to maintain our credit rankings and strong balance sheet while we fund our robust infrastructure plan, we expect to issue approximately $300 million of common equity in total in 2024.
Speaker Change: By the end of 2023, we sold for approximately $230 million of the expected $300 million through the At-The-Market, or ATM, program, consisting of approximately 2.9 million shares, which we expect to settle by the end of this year.
Speaker Change: Together with the issuance under our 401k and DRIP plus programs, our ATM equity program is expected to fulfill our 2024 equity needs.
Speaker Change: Additionally, as of September 30th, we've entered into forward sales agreements under our ATM program for approximately $155 million.
to support our 2025 equity needs.
Speaker Change: with an average initial Ford sales price of approximately $82 per share.
Thank you for watching!
Speaker Change: As always, the community is thoughtful about strategically financing our robust capital plan.
Thank you for watching!
Speaker Change: Turn to page 23. We remain confident in our long-term strategy which we expect to continue to drive consistent superior value for all of our stakeholders.
Speaker Change: It's highlighted that we have made significant progress toward resolving several regulatory and legal proceedings.
Speaker Change: We have strong infrastructure investment opportunities to benefit our customers and attract new businesses.
Speaker Change: And we continue to see signs of an attractive regional economy, including solid retail sales growth, strong employment growth in the St. Louis region, moderating interest rates on inflation, and a robust economic development pipeline that will allow us to deliver strong earnings growth in 2025.
Speaker Change: Looking beyond, we expect consistent, strong earnings per share growth driven by robust rate-based growth, disciplined cost management, and a robust customer growth pipeline.
Speaker Change: As we've said before, we have the right strategy, team, and culture to capitalize on opportunities to create value for our customers and shareholders. We believe this growth will compare favorably with the growth of our peers.
and shares continue to offer investors an attractive dividend.
Speaker Change: In total, we have an attractive total shareholder return story. That concludes our prepared remarks. We now invite your questions.
The End
Speaker Change: Ladies and gentlemen, if you would like to ask a question, please press star 1 on your telephone keypad and the confirmation tone will indicate your line is in the question queue.
Speaker Change: You may press star 2 if you would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start keys.
Speaker Change: And our first question comes from the line of Jeremy Tonnet with J.P. Morgan. Please proceed.
Thank you. Thank you.
Hey, this is Rabadon for Jeremy. How are you?
Oh, great. Good morning.
Speaker Change: So maybe just to follow up, you know, you mentioned providing 2025 guidance at 3Q to underscore your confidence in your earnings trajectory. Could you elaborate on that strategy amidst several ongoing regulatory proceedings? And specifically, how should we think about the 2025 range relative to potential regulatory outcomes?
Speaker Change: Yeah, sure. Well, you know, first of all, as you look back on some of the comments we made at the second quarter,
You know, we have a long history of...
Speaker Change: you know, growing at 7% or above. You know, our goal as we go into each year, of course, is to deliver at the midpoint or even higher within our range.
Speaker Change: You know, some of the things that we pointed to last quarter that, you know, just giving us more long-term conviction have to do with, you know, inflation, cooling, strong local economy, demand improving, some of the things we've talked about even on this call with respect to customer growth opportunities.
Speaker Change: They're great investments that we've got across all of our operations, whether it's distribution, transmission, and generation, and of course a strong balance sheet.
Speaker Change: You know, we have strong conviction in our ability to grow long term, and as we looked at 2025, we certainly have confidence in our ability to deliver within the range that we pointed out to today.
Speaker Change: and you know as we look ahead over the next few months typically we have delivered this guidance in February. You know we're delivering it now because we do have strong confidence and we believe that you know whatever unfolds in the months ahead that we'll be able to adjust our plan hit the mark in terms of the guidance that we delivered.
Speaker Change: Great, thanks. And then maybe just to follow up, you know, on the mentioned economic development opportunities, you know, you mentioned you've gotten some interest from an impressive several gigawatts of potential opportunities. You know, just any high-level thoughts on, like, how you factor in potential double counting, like, say, if those customers are, you know, also submitting those inbounds to other, you know, utilities or service territories?
Speaker Change: Yeah, sure. And look, I think you're absolutely right. You know, we pointed out on our slide that we have tens of thousands of megawatts of potential new demand.
Speaker Change: So a significant amount. We certainly expect that. I don't know if we call it double counting, but you know a lot of these folks are looking at the same properties and you've got developers as well as hyperscalers. And so yeah, there's certainly duplication in there.
Speaker Change: So what we're doing is really working through with each of those counterparties in a methodical way We mentioned that we've had progress with You know counter potential counterparties representing several gigawatts of demand
Speaker Change: And, you know, we're working through with them on, you know, evaluating the sites, the transmission access.
the generation that might be needed to serve them.
and eventually we expect that to be narrowed down.
Speaker Change: It's one of the reasons why we have been cautious about not really announcing any of this load until we get a construction agreement because these conversations have to progress to the point where we have a construction agreement. The other thing to keep in mind is we mentioned in our prepared remarks.
Speaker Change: that we expect that over the coming months we'll get even greater visibility. We'll have a better sense of what the demand might be over the coming years and be able to incorporate that into our plans for incremental generation.
Speaker Change: expect to put a greater stake in the ground, if you will, in February, which is when we believe we'll be in a position to update some of those sales forecasts and update our IRP.
Speaker Change: And the next question comes from the line of Paul Patterson with Glenrock Associates. Please proceed.
Hey, good morning
Hey, Paul. Good morning. So...
Speaker Change: Just a few quick questions. On the reflow group plan, it looks like I guess they're going to have oral arguments, I guess, based on what the AG wanted.
Any thoughts about that?
at this late date that they're looking at doing that.
Speaker Change: Yeah, Paul, I don't think I'd, you know, read anything into that. Obviously, there are, you know, some, you know, differences which I think because of the hard work of our teams along with very stakeholders in this case is.
Speaker Change: You know, we've really narrowed down the, you know, potential adjustments that folks have argued for. If you look on slide 21 in our materials, you know, we laid out where the, you know, proposed rate base would be taken into consideration, potential adjustments that have been advocated by various parties.
Speaker Change: and you see where the staff is and where the ALJ came out.
Speaker Change: You know, I think it's normal that you'd have oral arguments over, you know, the remaining differences. But, again, you know, I'd point to the ALJ's, you know, proposed order, you know, which certainly gives us, you know, confidence in terms of where this may land with the Commission when they ultimately decide in December.
Michael Moehn: Okay. Yeah. Hey, Paul, this is Michael. I was just going to add, hey, Paul, I mean, these oral arguments have been scheduled for a long time. You know, it's fairly typical, and they're actually being held November 20th. So as Marty said, I think, you know, what we have today is, you know, a constructive data point from the ALJ. I think all of the interveners are, you know, recommending approval of the grid plan at this point, and we'll just see where the arguments take us.
Speaker Change: Okay, great. And then on slide 9, you mentioned the transmission projects and the...
Speaker Change: you know, the reliability and also the low in customer cost. I was wondering if you just could elaborate a little bit more on the customer cost side, like what this might mean to customers, because we don't... Oh, we don't see them. Go ahead. I'm sorry.
Speaker Change: Yeah, no, it's okay, Paul. I mean, we're really referring to, and we added a bullet, which we haven't had in the past, about, you know, the customer benefits in a range of 1.3 to 5.6 times in terms of the portfolio cost. So, and that relates to the overall, you know, approximately $22 billion of projects. So, you know, when MISO goes through these and they,
Speaker Change: propose these various projects. I mean, one of the things they do is obviously estimate the cost of these projects, which we've listed, you know, at least for the projects in our service territory down below, you know, but they also do an assessment of what the benefits to the customers are going to be in relation to those costs.
Speaker Change: Each of these projects has the positive math behind it, if you will, that suggests that customers' costs over time will be lower as a result of these investments. That's what we're really trying to point out. Okay, but there's not going to be some dramatic costs, I guess, when these new lines show up.
Speaker Change: and cheaper stuff comes in or is it I mean I'm just sort of I'm wondering if there's any quantification on a on a rate impact or or is it sort of just it's sort of all mixed up together and it's going to take some time for it all to show up kind of thing
Speaker Change: Yeah, I mean, I think it'll show up over time. I don't have any, you know, exact rate impact to point to.
Speaker Change: I got it. Thanks. Okay. And then finally, on the new customers.
Speaker Change: You mentioned with one tranche of the new customers that there was 90% Missouri versus Illinois, I guess. And I guess I was wondering, when people are looking to...
Speaker Change: with all these robust discussions that you're having, is there one service territory that's more?
Speaker Change: attractive or there's more interest in versus another or is there any flavor as to if there is what might be driving that?
Speaker Change: Yeah, look, we have data center interest, really, in each of the states. So, you know, if you look, you know, over to the right, you know, we, on that slide, 2010, we talked about tens of thousands of megawatts of potential new demand.
Speaker Change: And you see various elements of that, and I would say, you know, today in our pipeline about 75% data centers, 15% manufacturing, and 10% other is probably how that breaks down.
Speaker Change: Within that data center interest that we've got, about 65% of it is Missouri and 35% of it is Illinois today in terms of what's in our pipeline. So there's clearly data center interest in each of the states.
Speaker Change: And, you know, each of the states is attractive for various reasons, and in some cases, different reasons.
Speaker Change: You know, it just so happens that 90% of that is actually in Missouri and about 10% of that is in Illinois today in terms of those agreements that we have in place.
Speaker Change: Now, you know, as we look ahead, you know, certainly the impact to us from an earnings perspective is going to be differentiated in the two states. In Illinois, obviously, if we have transmission or distribution investment that supports that load growth, we get the earnings impact of that.
Speaker Change: You know, in Missouri, which is, you know, vertically integrated, you know, we also have the impact of the opportunity to earn on any incremental generation.
Speaker Change: Okay, but there's no... that's the way it fell out, I guess. Okay, I appreciate it. Thanks so much and have a great one. You bet.
Speaker Change: And the next question comes from the line of Carly Davenport with Goldman Sachs. Please proceed.
Hey, good morning. Thanks so much for taking my questions.
Speaker Change: Maybe just to follow up on an earlier question on the earnings guidance range, as you think about 25, you know, growth at just over 7% relative to the midpoint of 24, can you just give us your thoughts on looking forward where you see yourself in the range just taking into consideration some of the incremental opportunities that you've highlighted and if there's any potential upside to that range going forward.
Speaker Change: Yeah, Carly, look, I mean, you know, in terms of our range, we've said, you know, 6% to 8% is our EPS kegger that we're targeting for the period 2024 to 2028. You know, as I mentioned earlier, you know, when we look back, we've got a strong track record of delivering above the midpoint, above 7%. And our goal as we look ahead is to deliver at or above.
Speaker Change: You know, as you said, I mean, we have some positive data points we're seeing today, you know again One of the things is this load growth, which we just talked about some potential load growth We're working hard to bring that to fruition for the benefit of our
Speaker Change: our customers, our communities, and we're going to work hard to do that.
Speaker Change: But at this point, I'd say that's where we're at. Now, we'll come out in February, we'll, you know, provide our perspectives on load growth going forward, update our investment plans, and we'll note any potential implications on our guidance, but.
Michael Moehn: feel good about the six-to-eight, and again, our target of hitting at or above that midpoint. Michael, anything to add? Hey, Carly, it's Michael. I think it's well said. The only other thing I might add is just, again, the overall backlog of investment opportunities.
about this earlier.
Speaker Change: We got the 55 that we continue to point to. I think that pipeline remains robust. We talked about this opportunity just with the data centers.
Michael Moehn: that could potentially drive some additional capital. So, I mean, your question specifically was what could take you to the upside of that. I think it's those additional investment opportunities over time.
Speaker Change: I think there's also opportunity, as Marty said, you know, not only just from the data centers, but the underlying economic data within, you know, certainly in the Missouri territory is very strong today.
Speaker Change: just looking at the overall employment, the GDP rate, we're seeing customer growth, which we just alluded to, we're seeing customer account growth, population growth, all of those things I think are a great backdrop.
Speaker Change: And then, yeah, we continue to think about just how do we optimize the financing of this going forward. So that's where I'd probably leave it at this point.
Speaker Change: Got it. Great. That's super helpful. And then maybe just another quick one. You've previously talked about some O&M reductions coming in the second half of the year. It looks like 3Q was still up year over year, but then you called out some efficiencies in the earning driver slides for 4Q. Are you able to give some color on what types of programs you're sort of pursuing there, and if what you've called out on the slides is all-inclusive of what you're looking at on O&M?
Speaker Change: Yeah, you bet. And you're right, we have been pointing to this, you know, towards the beginning of the airstead. It was me in the back half. And I think, you know, you're certainly seeing that show up.
Speaker Change: You know, in Missouri, you look specifically, you know, $0.05, you look at what we're pointing to in the fourth quarter, you know, year over year expecting $0.03 and $0.01 in Missouri and Illinois natural gas, respectively.
Speaker Change: And again, you know, just consistent with some of the things I've talked about in the past. I mean, this is not something that's new to us. We've been after these programs for a long time. Beginning of the year, we talked specifically about some things that we were doing around.
Speaker Change: just being thoughtful with respect to headcount, discretionary spend coming out of some of the Illinois decision. I think we've continued to lean into that. We continue to find more opportunities.
Speaker Change: looking at spans and layers, looking at simplification. I mean, we just, we have an opportunity for us to just.
be more consistent across our platform, which drives efficiencies.
Speaker Change: back-end production, overhead costs, etc. And so we do a lot of benchmarking in this. You see some of that public benchmarking. And we benchmark well, but in areas we have opportunities. And so wherever we're benchmarking, we're constantly looking at how do we move up a quartile.
Speaker Change: And I think the team is absolutely committed to this and we have not exhausted all the opportunities at this point.
David Arcaro, Nicholas Campanella,
Speaker Change: Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star 1 on your telephone keypad.
Speaker Change: And the next question comes from the line of Julian Dumoulin-Smith with Jeffries. Please proceed.
Speaker Change: Yeah, hi, good morning. It's actually Brian. We're still on for Julian.
Brian, how are you?
Speaker Change: Hey, just to follow up on Emory & Transmission, you know, it looks like just the assumption in the 25 versus 24.
Speaker Change: It looks like growth in rate base is pushing 9% and it seems that the growth there is accelerating as we move through the five year.
plan approaching, I guess, the double-digit overall.
Speaker Change: rate-based growth CAGR. Is the near term in 2025 and 2026 really just
Speaker Change: the prior MISO-TRANGE projects that have been approved and that you're developing. And then, is there any possibility of these TRANGE2 projects being pulled forward, you know, versus the early to mid 2030s target dates?
Thank you.
Speaker Change: You know, as it relates to the, you know, MISO projects, you know, the Tronch One projects, I tell you the construction there is
Speaker Change: really going to take place between 2026 and 2020-30 is, you know, our projection today.
Speaker Change: And then, you know, some of these MISO Trunch 2.1 projects, you know, those, you know,
Speaker Change: will probably go in service in the 2032 to 2034 timeframe.
Speaker Change: You know, we think most of the expenditures for those are outside of the current five-year period, although, you know, we'll be certainly looking to accelerate those if possible. There's no reason that Tranche 2 project work and Tranche 1 project work can't overlap.
Speaker Change: So we'll be looking to bring those to fruition for the benefit of our customers and communities as soon as we can, once they're approved and once they're assigned to us.
Speaker Change: And then otherwise, you know, we always have ongoing projects in the transmission space that are outside of those that are part of the Trunch 1 or Trunch 2.
Speaker Change: that are approved through annual MISO processes. And so, you know, those continue to be foundational in our overall spending and growth in the transmission space. The only thing I might add to it, I mean, think about the $55 billion pipeline. You know, we've talked about this, about $5 billion.
Speaker Change: is in there with respect to the LRTP projects. Brian, so you think about Tronch 1, you know, we had the 1.8 assigned, the $700 million on the competitive projects.
Speaker Change: There was some variation of those ultimately where they ended up settling out, but then you have this tranche 2.1 Which will again, we'll see what ultimately gets assigned or competitive, but there's 3.6 billion dollars of eligible projects And then they're going to obviously roll into this 2.2 tranche
Speaker Change: And so, I mean, I'm just giving you the math. If you kind of want to think about that $5 billion, it's, you know, you can see the pipeline associated with getting there pretty easily.
Okay, great and just
Speaker Change: As we look towards the 2025 Missouri legislative session, how active will Ameren be or involved in, you know, any proposed bills that I think, you know, might need to be proposed as early as this December, whether it's, you know, PISA for fossil fuel or gas fire generation.
Speaker Change: any ROFR, or I guess expanding, expediting the generation review, which would, I think, tie into maybe your February 2025 IRP update.
The End
Speaker Change: Yeah, look, those are all, you know, potential considerations that are very logical. Last session, we were advocating for things along those lines, which was the expansion of, you know, PISA to be able to cover generation assets.
Speaker Change: extending the sunset date on the piece of legislation to a later date to make sure it overlapped and covered some of the
generation assets that are included in our IRP.
Speaker Change: You know, we did and will continue to advocate for a right of first refusal on transmission because again, we think it's critical to get these transmission projects done sooner rather than later. We just talked about the great benefit to cost ratios they've got.
Speaker Change: And, of course, I think they're key as well as building incremental generation to making sure that we've got reliable.
reliable power, low-cost power here in our region.
Speaker Change: Those are going to be key things that we focus on, and my sense is that there will be a variety of other things that...
Speaker Change: might be might be considered as we focus on, you know, as a state on economic development, job creation, and making sure that we've got a strong, reliable, affordable, balanced portfolio of energy resources to be able to meet the needs of prospective customers. So, you know, certainly be considering all those things as we move towards that next legislative session.
Great, thank you very much.
Thank you.
Speaker Change: And the next question comes from the line of David Potts with Wolf Research. Please proceed.
Good morning.
Speaker Change: Morning. We may have just hit on this, but let me ask it maybe a little differently. Can you maybe elaborate on how some of these potential agreements with large load customers may transpire? And could they entail like potential new generation that the customer helps cover?
Speaker Change: directly, and then just how are regulators and policymakers facilitating those type of discussions, if there are.
Bye-bye.
Speaker Change: Yeah, good question. Yeah, I think that, you know, as we look at some of the, you know, potential load growth, specifically in Missouri, where we're vertically integrated and we own generation, you know, we've got to be thoughtful about what incremental resources might be needed to serve some of the incremental load.
Speaker Change: You know, we mentioned on our last call with respect to, you know, this 350 megawatts of additional load that's been announced with the construction agreements, you know, we have the available resources to be able to serve them. But as these load forecasts grow, we're going to need to consider additional resources.
Speaker Change: And so that's under consideration now. That's gonna be what we'll be trying to work through as we think about updating our integrated resource plan early next year. And I think that plan, when we file it, will deliver more clarity in terms of our thoughts there.
Speaker Change: And then with respect to the incremental cost, yeah, it's something we need to think through as we think about the incremental investments that will be made to serve all of our customers, including these additional customers.
Speaker Change: just need to think through the appropriate apportionment of costs so that all parties are treated fairly. So, you know, that's an ongoing consideration, ongoing dialogue with some of the, you know,
Thank you.
Speaker Change: some of the entities that are looking to expand here, and I think those, you know, those conversations, you know, will continue over the coming months.
Speaker Change: Yeah, hey David, it's Michael Lyons, just pointing out the obvious. I mean, we obviously, historically, we're a bit long, right, and we begin this transition and we have some of these plans closing, and obviously we have less length today.
Speaker Change: and in Castle Bluff that Marty spoke about earlier, that's certainly a step in that right direction.
Speaker Change: You know, that's exactly what the team is evaluating as part of this IRP evaluation and whether we're going to need to file again is trying to take some various scenarios under these load growth opportunities and match that really up against our generation to see if we need to add additional generation on top of that.
Speaker Change: You know I would just say this, yeah and look when you look at our IRP you can see the elements that we might bring forward. I mean you know we had renewable resources in there we'll be evaluating can we pull those forward, can we pull forward battery storage technology. You know as Michael said we've got some simple cycle, combined cycle that we need to add some additional gas fire generation. I mean these are the elements we're looking at as we think about updating that IRP.
Speaker Change: Okay, that makes sense. And then just on 25 quickly, the...
Speaker Change: Do you anticipate your consistent EPS growth beginning in February to be based off of 2025 guidance?
Speaker Change: I mean, that's sort of been our historical practice, David, you know, that we'll update based on whatever that midpoint is for that 25, you know, in this case it's that $4.95, so that would be the expectation.
Okay, great. Thank you.
Thank you.
Speaker Change: And the next question comes from the line of Nick Campagnolo with Barclays. Please proceed.
Speaker Change: Hey, good morning. Thanks for taking my question. I got up a little late, so I'll try not to repeat. But, you know, clearly, you gave 25 guide earlier here, which is a side of confidence going into next year, capital is going up. How much capital is going up in the near term versus kind of the long term of your financial plan?
Speaker Change: As that impacts your equity needs, do you still just kind of programmatically lean on the ATM or would you kind of contemplate other mechanisms around that? Thank you.
Michael Moehn: Hey Nick, Michael here. Yeah, I mean from a capital perspective, I mean I just, you know, continue to think in terms of the 21.9 billion that's out there, right? And so we've talked about a number of factors that we're updating for and just, you know, spent some time talking about this IRP.
Michael Moehn: And so that's the process that we're going through, going through our typical capital planning process as we speak and putting the final touches on that. That's what we'll come out with here in February.
Michael Moehn: From a financing perspective, you know, the plan that we put out there last February still stands today, you know, focused on that $300 million, got that largely done for 2024. We're starting to lean into the 25 piece, you know, got about 155 of that 600 done.
Michael Moehn: In terms of ongoing financing assumptions, we've talked about this, we like our ratings where they are, the BAA1, BBB+, downgrade threshold of 17 at S&P, we've got quite a bit of margin there.
Michael Moehn: the threshold metric for us is on S&P at 17. And so that's the one we'll continue to watch, you know, from a financing assumption standpoint, I would, you should assume what we sort of put out there at this point. And so maintaining those and that consolidated equity ratio, you know, around 40%, which is where it is today.
Thanks a lot, I appreciate that.
You know
Michael Moehn: just maybe some considerations with the election that just that just happened
Speaker Change: I believe that there is some EPA-driven investments in your plan today. Do you think any of that could change? And then how would you quantify your positioning around the new candidate? And can you also clarify if you have transferability cash flow in the plan? Thank you.
Speaker Change: Yeah, there's a lot there. I think the, obviously, you know, election, you know, just happened. I think that...
Speaker Change: You know, look, when we think about the election overall, one of the things to keep in mind is that our strategy and our priorities as a company certainly don't change. Our focus is on making great infrastructure investments for the benefit of our customers and communities, advocating for energy policies that maximize that value.
Speaker Change: And of course, as I mentioned before, seeking great economic development opportunities.
Speaker Change: and we're going to be working with policy makers to make sure we maximize the benefit of those for our communities.
Speaker Change: Well, you didn't ask about this, but I think the most significant area of focus coming out of the federal election is probably going to be around tax policy. And as you know, as a fully regulated company, all the increases and decreases in taxes,
Speaker Change: flow directly through to our customers rates. So, you know, things like the corporate income tax rate, the value of tax credits, those are things that have pretty meaningful effects on our customer rates.
Speaker Change: So my sense is with Republican leadership, it's going to certainly be less likely that we see an increase in corporate taxes, and I think that's positive for our customers from a bill perspective, and I do expect there's going to be a conversation around some of these clean energy tax provisions in the IRA.
Speaker Change: And so I think we in our industry, you know, we'll all engage with policymakers on the considerations and
Speaker Change: You know, my expectation is that, you know, Republicans will probably take a surgical approach to adjustments to the IRA.
Speaker Change: You know, given some of the direct customer benefits, you know, for us specifically, I'd say the most meaningful benefits of the tax credits around solar, battery storage, nuclear, and wind. And so those are some of the things we'll be thinking about.
Speaker Change: You mentioned transferability. Transferability of tax credits is important to us, and we'll make sure that policymakers are certainly aware of the importance of those, too.
Speaker Change: You know, frankly, based on our IRP that we have on record, we filed, all of those things have a value of about a billion and a half positive value.
those tax credits due to our customers in Missouri alone.
Speaker Change: It's a significant benefit, and that's over about a 10-year period, the next 10-year period in our IRP.
Speaker Change: We'll just make sure that, you know, as we engage that, you know, with policy makers, whatever they decide, that at least they have, you know, those facts and they're aware of those benefits that, you know, we expect to have for our customers.
Speaker Change: And at the end of the day, you should know that we're, you know, the investments in our system.
Speaker Change: that we're going to make, or whatever we think are appropriate from a reliability and affordability perspective and as we continue to adopt some of the new technologies that are out there. I think those are the biggest points with the election. You mentioned EPA rules.
Speaker Change: You know, I think that, you know, with respect to the EPA rules and the CapEx that we have in our plans today, I don't see those as changing. You know, the EPA's greenhouse gas rules, on the other hand, that are working their way through the courts.
Speaker Change: You know, I do expect that ultimately those rules will be stayed given some of the provisions that are in them with respect to, you know, carbon capture and storage and co-firing with natural gas.
Speaker Change: and you know we'll see what happens with respect to those proposed rules as we go through sort of a change in administration and a change in legislature but I think those those rules personally in my mind are you know are flawed as as they stand today so
Speaker Change: You know, those would be my comments. Any other questions from you?
Speaker Change: I would say that you answered the four-part question very well. I appreciate it and thanks. Thank you in Florida
You bet.
Speaker Change: Thank you. Ladies and gentlemen, this concludes our question and answer session. I'll turn the call back to Martin Lyons for closing remarks.
Martin Lyons: Terrific. Hey, thank you all for joining us today. As you can tell, we remain absolutely focused on closing out the year very strong and we look forward to seeing many of you at the conference next week. So again, thank you very much and everybody have a great day.
Speaker Change: This concludes today's conference. You may disconnect your lines at this time. Enjoy the rest of your day.
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